Mesabi Metallics internal fight casts shadow over project

Part of the taconite plant under construction at the former Essar Minnesota Nashwauk project in May 2015. Ownership of the incomplete plant is now in doubt. (Aaron J. Brown)

So, I was gone for a week. As near as I can tell, I’ve returned to a world in which Nashwauk’s Mesabi Metallics owns half a mine with half a processing plant on it, run by two competing management groups.

Last week, some of the money behind Chippewa Capital Resources, owners of the Mesabi Metallics project, declared that CEO Tom Clarke was out. The outfit, Nubai Global Investments, installed their own team lead by Gary Heasley to manage the project. Among other things, Heasley is a former executive vice president of Steel Dynamics.

Steel Dynamics owned the now defunct Mesabi Nugget project in Hoyt Lakes that closed in 2015.

Oh, but there’s this. Tom Clarke says nope. He’s still in charge of Mesabi Metallics. Pay no attention to those impatient investors; he’s got this. You might recall that Clarke recently declared bankruptcy on his ERP Iron Ore investment in the former Magnetation properties. But he argued that was a separate matter. His focus remained opening a taconite plant at Nashwauk.

So everything heads back to court. Since new money seems unlikely to join this project anytime soon, the Nubai investors will probably prevail in replacing Clarke. But that’s merely a guess. It’s just as likely that the entire thing will unravel upon further inspection.

Mesabi Metallics did receive the state mineral leases on the remaining land around the Nashwauk plant, so they’ve got that going for them. But the state’s patience for these antics probably won’t last longer than Gov. Mark Dayton’s term, which expires this January. A new governor will take office and, regardless of party, will probably change policy toward the long-languishing project that received significant state infrastructure investment ten years ago.

Cliffs wants the iron ore there for its other Minnesota mining operations. Cliffs CEO Lourenco Goncalves hinted at the possibility of opening another hot briquetted iron (HBI) plant on the Iron Range. But that can’t be known until he completes construction of the company’s first HBI plant in Toledo, Ohio, later this year.

This all began in 2007 when Essar Global bought the project from a group of Minnesota investors. They announced plans to build an integrated mine and steel mill on the site. Gov. Tim Pawlenty and local DFL legislators supported a successful bonding project to build rail, road and power access for the site.

Gradually, Essar reduced the scope of the project to just a taconite mine. Essar began construction on the Nashwauk plant, but experienced several financial setbacks that prevented them from finishing. When their Minnesota subsidiary went bankrupt, Mesabi Metallics arose from the ashes. That nascent company was scooped up by Clarke, Nubai and others under the handle Chippewa Capital Resources.

Like Essar, Chippewa Capital Resources seems to have struggled to put the finishing touches on a financing package. Cliffs has used every opportunity to disrupt the process. Their argument has been that the Iron Range can’t support another iron ore seller without affecting jobs at other mines.

As for the current state of the project, and the promised jobs that the region has sought for so long, well, we wait. Mesabi Metallics — no matter who runs it — probably only has months to prove themselves before the state pulls those leases back.

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Comments

Yes, but it’s reasonable to say that new investment will be slow in coming to this project until they resolve this matter. That gives the Nubai investors the upper hand. I guess Clarke could buy them out, but that seems far fetched, too. Really, it’s a just a big mess.

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